Apcotex Industries - monopoly in Synthetic Rubber?

Apcotex concall April 2022

1…The growth in fourth quarter and for the year was driven by strong volume across all the industries, geographies product group and also increase in realization.

2…Exportation contribution grew to 21% of the overall revenue

3…Revenue target

=We have potential to grow this business to over the next five years to maybe two and half times the current revenue.

4…Capacity utilization

=We are running at 100% capacity utilization right now even the debottlenecking projects that we took up in this financial year early in the
financial year are fully utilized now.

=Last year meaning in the
middle of 2021 we finished that was small debottlenecking projects to the extent of 10 crores, 15 crores investment which we already completed in that is already on stream and fully utilized.

=Now so we do not have capacity and the new capacity will all start coming on stream from Q3 onwards
when our two big projects are coming on stream

5…Focus on volume growth

=We focus more on our volumes because in our kind of business given their huge volatility their oil prices
and therefore the downstream petrochemicals which are our main raw materials so revenue can vary.

=So, for example, if oil falls to half then you could see a dip in revenue, but what we are more interested in is focusing on our EBITDA margins on our contribution margins and of
course per ton margins as well more than anything.


=I would say for the year for ApcoBuild we are in terms of volume higher by more than a 100% I think 120%, 130% so we feel it is still a small part of a business and we do not give out numbers separately for ApcoBuild, but as and when it becomes we feel it is a reasonable portion we will talk about it more, but as of now we are very happy with the development in sort of
construction chemical ApcoBuild

=For apcobuild, we have clients in Maharashtra, Gujarat, Madhya Pradesh, and Goa was the latest state we entered.

= Obviously since we are backward integrated so we do have some advantage there

=Distribution scale up is really the challenge in the sort of B2C space
where ApcoBuild and we just want to ensure we do slowly profitably and of course we have added some products and we are outsourcing and adding to our product portfolio

=But we want to ensure that what we deliver to the customers is at a price point and the quality that not
available in the market anywhere. So we are focused on the few products and as of now we are still learning and growing in the western part of India.

=We feel pretty confident that the business model that we have being backward integrated and focusing
on few products and few specific niche applications around waterproofing, I think we should
feel confident that over the next few years we will grow our geographically a lot of scope to grow.


… We are doing two projects one in Walia, one in Taloja the one in Walia is completely for gloves there will be some flexibility that we will try and build in, but the one in
Taloja is a multipurpose latex plant and at this stage we are not sure depending on again the
margins we can use it for our styrene butadiene latex products that go into carpet construction
paper and so on or uses for nitrile latex for gloves so I just want to clarify that

A=Taloja @ Latex@ 10,000 tons

=gloves manufact capex will be completed by q2 2022

B=Walia@ NBR@50,000 tons

NBR capex by q3 2022

=We are waiting on the final environmental clearance for NBR project which should come
through we are expecting this quarter by the end of this quarter after which we need to take a call.

=Our new projects revenue would start kicking in from Q3, but obviously it will not be overnight a 100% it would build up over we hope 6 months or it could take a little longer because some of the re-approval cycles from a new plant even for existing customers they would want to test it out for a two, three months before completely moving whole hog

C=We feel bullish as I said, but we have not taken a final call there is no major update. Our focus is just to get these two projects of the ground this in the next 6 months and hopefully as
and when we take a call I will let you know, but it is certainty as part of our strategic plan it is on the cards and one more thing that

=So the cash outflow up to March 31st out of our total project size is about 190 odd crores
between both plants and we are investing in a zero liquid discharge plant in Walia as well so
everything put together out of which we would have spent about 40%.

8…Demand cycle is quite strong

=Unfortunately there are customers that are asking us for materials, but we are not able to go through the approval cycle because we just do not have material to give them even few tons we do not have today


=There could be one or two quarters the margins will fall, but our endeavor is to stay between these 13% and 17% margin

10…Long term growth sustainability

=We feel pretty confident that we can we have developed a set of products, set of customers there are now quite sticky and as I said look there could be a certain situation where for one
quarter or few months where there is certain drop in prices and we are stuck with some high cost raw material inventory because we have no choice, but to stock up on imported raw
material. So, that could happen but in the long term I think as a business we have from strength-to-strength, we have grown our volumes, we have grown our customer base, we have
grown our geographic base within customers we have increased market share overall we have
increased market share we have gone into new industries and steels that we are not in so we have done a lot of work over the last three, four years.

= So, we feel pretty confident in the long run that these kinds of margins between as I have always said between 13% and 17% are
sustainable and we focus on EBITDA per ton. So, I think the bottom line numbers is what we
focus on and I think we feel confident that it is sustainable in the long run.

11…Past few yrs growth

=I think so and if you see the last 6 quarters, 7 quarters I mean we have delivered quarter-on quarter no matter what is happening in the world whether there was a second wave in India, no matter what is happening in China, no matter what is happening due to the war all these
brands of Russian, European we have sort of kept our heads down and focused on our business
and show there are some tailwinds as I mentioned right now for sure whether they last or not we are quite confident that we are quite happy with where the business is.

13…Why growth in last 5 yrs

A…Less Import
=Certainly imports have become harder for everyone and everyone prefer local supply as far as the India market is concerned which is
almost 80% of our total turnover.

=We have certainly benefitted from imports being more expensive due to higher shifting rate, higher detention charges and so on, availability is also an issue in many cases. So, we are certainly benefitted so that is the external factors.

B…Gaining market share

=On the internal side we have done so much work over the last 5 years, 6 years since we acquire on
OMNOVA Solutions India. In our Walia plant as well as in our older business
in Taloja and so we have grown market share across the board and at this point I am fairly confident that across
all the product categories that we have almost all we are number one in India or a joint number one let me put it this way where market share is very close to somebody else.

=So, we are quite confident and if you compare this about five, six years ago I would say you are number one in
the few categories, but a strong number two in most categories.

=So, I think we have grown
market share here in India

=We have obviously 200 plus crore of our sales this year is from
export which if you compared to few years ago has been a phenomenal growth multiple what we were, at that time only 30 crores, 40 crores maximum would been our exports at that time.

14…Raw material availability

Overall we are we spent a lot of time these days much more than we are in the past looking at all our supply chain and making sure raw materials arrive on time and we have enough so that the production does not hassle.

Disc…invested since 4 yrs and added recently

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